SEGMENT REPORTING

9 Months Ended

Sep. 30, 2011

SEGMENT REPORTING

NOTE 14 - SEGMENT REPORTING

Currently, the Company conducts business in three operating segments—Community Banking, Insurance and Investment Management.  Each of the operating segments is a strategic business unit that offers different products and services.  The Insurance and Investment Management segments were businesses that were acquired in separate transactions where management of the acquisition was retained.  The accounting policies of the segments are the same as those described in Note 1 to the consolidated financial statements.  However, the segment data reflect inter-segment transactions and balances.

The Community Banking segment is conducted through Sandy Spring Bank and involves delivering a broad range of financial products and services, including various loan and deposit products to both individuals and businesses.  Parent company income is included in the Community Banking segment, as the majority of effort of these functions is related to this segment.  Major revenue sources include net interest income, gains on sales of mortgage loans, trust income, fees on sales of investment products and service charges on deposit accounts.  Expenses include personnel, occupancy, marketing, equipment and other expenses.  Amortization of intangibles related to acquired entities amounted to non-cash charges of $0.3 million for the three months ended September 30, 2011 and 2010, respectively.  Non-cash charges associated with amortization of intangibles related to the acquired entities amounted to $1.0 million for the nine months ended September 30, 2011 and 2010, respectively.

The Insurance segment is conducted through Sandy Spring Insurance Corporation, a subsidiary of the Bank, and offers annuities as an alternative to traditional deposit accounts.  Sandy Spring Insurance Corporation operates the Sandy Spring Insurance, a general insurance agency located in Annapolis, Maryland, and Neff and Associates, located in Ocean City, Maryland.  Major sources of revenue are insurance commissions from commercial lines, personal lines, and medical liability lines.  Expenses include personnel and support charges.  Non-cash charges associated with amortization of intangibles related to the acquired entities were not significant for the three ended September 30, 2011 and 2010, respectively.  Amortization of intangibles amounted to $0.2 million for the nine months ended September 30, 2011 and 2010, respectively.

The Investment Management segment is conducted through West Financial Services, Inc., a subsidiary of the Bank.  This asset management and financial planning firm, located in McLean, Virginia, provides comprehensive investment management and financial planning to individuals, families, small businesses and associations including cash flow analysis, investment review, tax planning, retirement planning, insurance analysis and estate planning.  West Financial currently has approximately $748 million in assets under management.  Major revenue sources include non-interest income earned on the above services.  Expenses include personnel and support charges.  Non-cash charges associated with amortization of intangibles related to the acquired entities with respect to the results for the three months ended September 30, 2011 and 2010, respectively, were not significant.  Amortization of intangibles amounted to $0.2 million for the nine months ended September 30, 2011 and 2010, respectively.

Information for the operating segments and reconciliation of the information to the condensed consolidated financial statements for the periods indicated is presented in the following tables:

	Three Months Ended September 30, 2011
	Community					Investment		Inter-Segment
(In thousands)	Banking			Insurance		Mgmt.		Elimination			Total
Interest income	$	35,008		$	1	$	2	$	(7	)	$	35,004
Interest expense		6,681			-		-		(7	)		6,674
Provision (credit) for loan and lease losses		(3,520	)		-		-		-			(3,520	)
Noninterest income		9,084			1,136		1,319		(203	)		11,336
Noninterest expenses		24,198			1,054		799		(203	)		25,848
Income before income taxes		16,733			83		522		-			17,338
Income tax expense		5,843			35		203		-			6,081
Net income	$	10,890		$	48	$	319	$	-		$	11,257
Assets	$	3,655,556		$	12,715	$	15,008	$	(57,236	)	$	3,626,043

	Three Months Ended September 30, 2010
	Community				Investment		Inter-Segment
(In thousands)	Banking		Insurance		Mgmt.		Elimination			Total
Interest income	$	37,450	$	2	$	2	$	(87	)	$	37,367
Interest expense		7,955		-		-		(87	)		7,868
Provision for loan and lease losses		2,453		-		-		-			2,453
Noninterest income		8,424		1,102		1,216		(203	)		10,539
Noninterest expenses		23,545		1,080		718		(203	)		25,140
Income before income taxes		11,921		24		500		-			12,445
Income tax expense		3,756		10		195		-			3,961
Net income	$	8,165	$	14	$	305	$	-		$	8,484
Assets	$	3,631,840	$	12,764	$	13,079	$	(51,066	)	$	3,606,617

	Nine Months Ended September 30, 2011
	Community					Investment		Inter-Segment
(In thousands)	Banking			Insurance		Mgmt.		Elimination			Total
Interest income	$	104,822		$	4	$	6	$	(70	)	$	104,762
Interest expense		20,338			-		-		(70	)		20,268
Provision (credit) for loan and lease losses		(854	)		-		-		-			(854	)
Noninterest income		25,162			3,526		4,050		(608	)		32,130
Noninterest expenses		72,631			3,346		2,379		(608	)		77,748
Income before income taxes		37,869			184		1,677		-			39,730
Income tax expense		12,157			76		653		-			12,886
Net income	$	25,712		$	108	$	1,024	$	-		$	26,844
Assets	$	3,655,556		$	12,715	$	15,008	$	(57,236	)	$	3,626,043

	Nine Months Ended September 30, 2010
	Community				Investment		Inter-Segment
(In thousands)	Banking		Insurance		Mgmt.		Elimination			Total
Interest income	$	112,554	$	6	$	4	$	(329	)	$	112,235
Interest expense		25,910		-		-		(329	)		25,581
Provision for loan and lease losses		23,585		-		-		-			23,585
Noninterest income		24,609		4,348		3,711		(608	)		32,060
Noninterest expenses		69,586		3,396		2,337		(608	)		74,711
Income before income taxes		18,082		958		1,378		-			20,418
Income tax expense		4,250		387		537		-			5,174
Net income	$	13,832	$	571	$	841	$	-		$	15,244
Assets	$	3,631,840	$	12,764	$	13,079	$	(51,066	)	$	3,606,617